In this study, we investigated the extent of peatland degradation and development in Peninsular Malaysia and in the islands of Sumatra and Borneo, in the western part of insular Southeast Asia, since 1990. Furthermore, carbon emissions caused by these land cover changes were estimated in order to evaluate their contribution to global climate change. High resolution Landsat (30 m spatial resolution) and Satellite Pour l'Observation de la Terre (SPOT; 10–20 m) satellite images were used to derive information on land cover in 1990 and 2008. Analysis of land cover changes since 1990 revealed remarkable reduction and degradation of peatswamp forest ecosystems. In less than 20 years, 5·1 Mha of the total 15·5 Mha of peatland had been deforested (11·6 Mha → 6·5 Mha; 75 per cent → 42 per cent) and the great majority of the remaining forests had been selectively logged. Simultaneously, area covered by unmanaged secondary growth ecosystems had doubled to nearly a quarter of all peatlands and industrial plantations had expanded dramatically (0·3 Mha → 2·3 Mha; 2 per cent → 15 per cent). It was conservatively estimated that these changes have caused minimum of 1·5 Gt carbon emissions into the atmosphere since 1990. Currently, peatlands of the study area emit at least 81 Mt of carbon (equivalent to 300 Mt of carbon dioxide) on annual basis due to mere peat decomposition. Thereby, it was concluded that peatland degradation and development in insular Southeast Asia during the past two decades have not only put the existence of Southeast Asian peatswamp forest ecosystems in danger but it has also caused globally significant carbon emissions and created a constant source of carbon dioxide. Copyright © 2010 John Wiley & Sons, Ltd.